Correlation Between Allianz Technology and Toyota

Can any of the company-specific risk be diversified away by investing in both Allianz Technology and Toyota at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Allianz Technology and Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allianz Technology Trust and Toyota Motor Corp, you can compare the effects of market volatilities on Allianz Technology and Toyota and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Allianz Technology with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allianz Technology and Toyota.

Diversification Opportunities for Allianz Technology and Toyota

0.22

Correlation Coefficient

Allianz Technology  Toyota

Modest diversification

The 3 months correlation between Allianz and Toyota is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Allianz Technology Trust and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp and Allianz Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Allianz Technology Trust are associated (or correlated) with Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor Corp has no effect on the direction of Allianz Technology i.e., Allianz Technology and Toyota go up and down completely randomly.

Pair Corralation between Allianz Technology and Toyota

Assuming the 90 days trading horizon Allianz Technology Trust is expected to under-perform the Toyota. But the stock apears to be less risky and, when comparing its historical volatility, Allianz Technology Trust is 1.1 times less risky than Toyota. The stock trades about -0.1 of its potential returns per unit of risk. The Toyota Motor Corp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  314,600  in Toyota Motor Corp on December 31, 2024 and sell it today you would lose (38,800) from holding Toyota Motor Corp or give up 12.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Allianz Technology Trust  vs.  Toyota Motor Corp

Allianz Technology Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allianz Technology Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Toyota Motor Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Allianz Technology and Toyota

The main advantage of trading using opposite Allianz Technology and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allianz Technology position performs unexpectedly, Toyota can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Toyota will offset losses from the drop in Toyota's long position.

The idea behind Allianz Technology Trust and Toyota Motor Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.